Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cogstate Ltd (COGZF) reported a record revenue result for the first half of the 2025 financial year, with total revenue of $23.9 million, up 19% from the previous corresponding period.
• The company achieved a significant improvement in gross profit margin, up 2.5 points from the most recent half and 7 points compared to the previous corresponding period.
• Profit before tax increased by 150% compared to the previous corresponding period, driven by strong growth in clinical trials revenue and excellent cost control.
• Cogstate Ltd (COGZF) has established a promising partnership with Medidata, which has already resulted in a phase 2 influenza trial award and a strong initial pipeline of opportunities.
• The company has made significant investments in technology, leading to efficiency gains through automation in data analytics, data management, and workflow management, positioning it well for future growth.

Negative Points

• Despite the record revenue, the value of contracted future clinical trials revenue decreased by 8% due to higher revenue recognition than sales contracts executed.
• Contracted future healthcare revenue also reduced as a result of the amendment of the ASI agreement, leading to a 20% decrease in total contracted future revenue compared to the previous year.
• Healthcare revenue saw a decline due to the renegotiation of the healthcare license agreement with AI, resulting in a reduction of future receipts by approximately $15 million.
• The number of employees decreased from 166 to 154, indicating a reduction in workforce, which could impact operational capacity.
• Operating expenses increased by $0.8 million due to ongoing investments in advanced analytics and automated data analysis, which could pressure short-term profitability.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with SKYZF.

Q: Can you quantify the improvements to the pipeline driven by the partnership with Medidata? A: Unidentified_2 (Brad): The partnership with Medidata adds significant scale to Cogstate due to Medidata's large organization and broad reach in the clinical trials market. This partnership introduces new opportunities and customers to Cogstate, expanding into areas like oncology and dermatitis. Unidentified_4 (Rachel) added that they have seen a record level of new opportunities and proposals, indicating a positive impact on sales opportunities and pipeline growth.

Q: Lead times between sales contract execution and revenue recognition seem to be shrinking. Do you see this trend continuing? A: Unidentified_2 (Brad): The trend is not about shrinking lead times but rather a change in the mix of indications. Smaller trials with shorter durations lead to quicker revenue recognition. This trend is expected to continue as Cogstate supports more opportunities through channel partners like Medidata. Unidentified_4 (Rachel) added that the indication mix and trial phases also influence the speed of revenue recognition.

Q: How does Cogstate view the changes in competitors and the use of cognitive assessments in clinical trials? A: Unidentified_2 (Brad): Cogstate hasn't seen significant changes from competitors like Cambridge Cognition in clinical trials. Their main competitors remain Signet Health and WCG Clinical. The use of biomarkers in Alzheimer's disease is seen as complementary to Cogstate's work, aiding in recruitment and identification in clinical trials rather than being a competitive threat.

Q: How can AI tools be used to Cogstate's advantage, and is it viewed as an opportunity or a threat? A: Unidentified_2 (Brad): AI is seen as an opportunity. Cogstate has been investing in advanced analytics and data monitoring to improve efficiency and reduce errors in clinical trials. Unidentified_4 (Rachel) added that AI helps in scalable data monitoring and quality assurance, allowing for strategic targeting of human reviews and aiming for 100% data quality oversight.

Q: What is Cogstate doing in the oncology sector? A: Unidentified_4 (Rachel): Cogstate's role in oncology trials involves cognitive endpoints, particularly in pediatric oncology and adult cancers with CNS involvement. They support these trials with digital cognitive assessments and traditional assessments, ensuring proper training and monitoring.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.